Giving back is baked into Simplicity’s business model

In the world of finance, the pursuit of profit often takes centre stage. But when Sam Stubbs and the other founders set up Simplicity back in 2016, they wanted to do things a little differently. Their mission was to help Kiwis become richer and smarter with money, and they also wanted to set up a meaningful and sustainable way to give back. So, when they started the business they also set up the Simplicity Charitable Trust (now the Simplicity Foundation) and since the beginning, 15% of the investment management fees earned by Simplicity has been donated to the Foundation. The Foundation in turn makes donations to a range of Kiwi charities around New Zealand.

Many Simplicity members are really supportive of the Foundation’s charitable giving, and it might even be a key reason they chose to invest with us. Others question why we choose to pass on a portion of our fees to the Foundation instead of passing on more fee reductions to members, particularly over the last few years with the market being so volatile and recent cost of living challenges. We absolutely understand why people ask this question. The answer is pretty simple: other than being the right thing to do, as a nonprofit we don't need to make a margin, so we can keep fees low for our members AND give back to the community. A true win-win in our books!

Benefits for members

- Costs
Running KiwiSaver and investment funds costs money. Being a nonprofit enables us to keep our costs down because we can access or negotiate lower fees for services, we receive support in kind from other businesses, and we have some truly amazing and skilled volunteers who donate their time and expertise. We run a small and efficient team and while we pay our staff fairly, there are no company cars or big bonuses. We don’t pay commissions to financial advisors and we don’t have the marketing or advertising budget of our competitors, we largely rely on word of mouth and genuine referrals. All of these things help us keep expenses down and as we grow, we can pass on any benefits of scale to members in the form of fee cuts. We have cut fees six times in six years and plan more cuts in the future.

- A long-term vision
In 2016, the Foundation was actually set up as the main entity, and it owns Simplicity Ltd NZ, which itself is a nonprofit.  As a nonprofit company, Simplicity doesn’t make a profit and doesn’t have a commercial value - as an entity  meaning we can’t be bought or sold - we’re “here for good”. When you’re planning to be around for the long term, you don’t have to do things in a hurry, you don’t have to make short-term decisions or try to make fast, and potentially risky, profits. As a KiwiSaver provider, most of our members are planning to invest with us for decades, so they will benefit from Simplicity’s long-term view, and the benefit of our low fees also accumulates over time. Sam has often used the tortoise and the hare analogy. Slow and steady wins the race.

- It’s the right thing to do
Lastly, giving back is just the right thing to do. As a good corporate citizen, we believe we have a responsibility to contribute positively to the world, and we understand that for New Zealand and New Zealanders to truly thrive we need to help address some of the issues facing our communities. Whether it's redistributing food destined for landfill, planting native trees, supporting career aspirations and education pathways for our young people, the charities that the Simplicity Foundation support are using the funding to make a positive impact now and in the future.

But what are the actual numbers?

15% of our management fees are donated to the Foundation. Across all KiwiSaver providers the average fee for $10,000 invested in a growth fund is 1.21%. If we take the average KiwiSaver balance, which was $28,778 as at the end of 2023, then the average KiwiSaver member invested in an average growth fund is paying 1.2% in fees, which is about $318 a year.

If they’re with the Simplicity KiwiSaver Growth Fund, they’ll be paying 0.25% pa which is approximately $72. The 15% of those fees that Simplicity donates to the Foundation works out to about $11 a year. Eleven dollars! For a bigger balance such as $100,000 the fees would be $250 per year and Simplicity’s donation from that to the Foundation would be about $38.

When you think about it like this, at the individual level, it doesn’t seem like very much at all, but collectively that money equates to about $2 million a year and that sort of money can make a real difference for those in need.


The numbers 

*Sorted Smart Investor website 22 December 2023
** Industry average balance from FMA annual KiwiSaver report 2023

Our number one priority is to make our members better off, but we truly believe you can make money AND do good.

You can find out more about the Foundation here. Or check out episode #12 of the Money Made Simple podcast:  The Simplicity Foundation & giving back: why it's a win-win

The information provided and opinions expressed in this post are intended for general guidance only and not personalised to you. These materials do not take into account your particular financial situation or goals and are not financial advice or a recommendation. Information is current at the time of posting, and subject to change without notice. Simplicity NZ Ltd is the issuer of the Simplicity KiwiSaver Scheme and Investment Funds. For Product Disclosure Statements please visit our website simplicity.kiwi.